Executive orders: the announcements in Barack Obama’s State of the Union address amount to ‘the biggest change to federal higher education policy since 1972’

Barack Obama aims to expose US colleges and universities to “competition from new, lower-cost, highly respectable entrants to the market”, including online learning providers.

Observers detected a new higher education agenda in the US president’s State of the Union address last week, in which he called on Congress to change the Higher Education Act so that affordability and value are considered in determining which institutions are “accredited”, allowing students to access federal financial aid.

“Taxpayers can’t keep on subsidising higher and higher and higher costs for higher education. Colleges must do their part to keep costs down, and it’s our job to make sure that they do,” Mr Obama said.

In the policy document accompanying the address, titled The President’s Plan for a Strong Middle Class and a Strong America, he says that either the current accreditation system should be reformed or a “new alternative system” should be developed, providing “pathways for higher education models and colleges to receive federal student aid based on performance and results”.

Elsewhere in his speech, the president unveiled an online “college scorecard” that will give prospective students information about an institution’s costs and its students’ graduation rate, loan default rate, average amount borrowed and employment outcomes.

Currently, the US operates a peer-review system to accredit universities, which means that the process by which institutions become eligible for federal student aid is owned by the institutions themselves.

Market forces

Andrew Kelly, a research fellow at the American Enterprise Institute, a US public policy thinktank, believes the system is outdated.

“It can be very difficult to get accreditors to sign off on some of the newer modes of credentialling - things like competency-based learning, indirect assessment, those sorts of things,” he said, pointing out that some accreditation assessments take into account the number of books an institution has in its library.

Allowing students to access federal aid when they take approved low-cost courses, such as free online courses that charge fees for supervised exams, could be one way to drive down the cost of tuition, Mr Kelly said.

“Opening up markets to competitors in a targeted way…has had the effect of driving down prices. It’s undeniable in sectors like financial services, air travel, trucking, telecoms,” he added.

Kevin Carey, director of the Education Policy Program at the New America Foundation, wrote on his blog that Mr Obama’s announcements were “the biggest change to federal higher education policy since at least…1972”, when laws set in motion what would eventually become the Pell Grant system for low-income students.

Speaking to Times Higher Education, Mr Carey agreed that the current accreditation system was not fit for purpose. “There are fully accredited colleges and universities that graduate less than 20 per cent of their students,” he said.

“Colleges need to work more cost-effectively, which won’t happen without legitimate competition from new, lower-cost, highly respectable entrants to the market. That’s what Obama’s proposed accreditation changes would allow.”

Mr Kelly said that some more traditional universities and colleges would find the idea “terrifying”. But he added that the US had always been innovative in its approach to higher education.

The US federal government currently spends more than $150 billion (£96.6 billion) a year on financial aid for higher education students. In his 2012 address, Mr Obama put colleges and universities “on notice” that if they could not keep tuition costs from rising, the amount of money they receive from the federal government would be cut.

However, Morton Schapiro, president of Northwestern University, urged caution over how any new accreditation system would assess “performance and results”.

“The details on how you do this really matter,” he said. “It would certainly be bad public policy to discourage the enrolment of talented ‘high risk’ kids from disadvantaged backgrounds in order to improve a school’s outcome measures.”

Bahram Bekhradnia, director of the Higher Education Policy Institute, said that Mr Obama could “look to the UK for inspiration”.

“We’ve got a balance here [in the UK], with the universities owning the [quality assurance] process but the government - through the funding councils - specifying what they want from the process, which is probably not a bad arrangement,” he said.